Question

The following transactions of Great Value Pharmacies occurred during 2018 and 2019​:

Requirement:

2018

Mar. 1 Borrowed $ 525,000 from Longwood Bank. The 15​-year, 12​% note requires payments due​ annually, on March 1. Each payment consists of $35,000 principal plus one​ year's interest.

Dec. 1 Mortgaged the warehouse for $300,000 cash with Sage Bank. The mortgage requires monthly payments of $3,000. The interest rate on the note is 44​% and accrues monthly. The first payment is due on January​ 1,2019.

Dec 31 Recorded interest accrued on the Sage Bank note.

Dec 31 Recorded interest accrued on the Longwood Bank note.

2019

Jan. 1 Paid Sage Bank monthly mortgage payment.

Feb. 1 Paid Sage Bank monthly mortgage payment.

Mar. 1 Paid Sage Bank monthly mortgage payment.

1 Paid first installment on note due to Longwood Bank.

1-Journalize the transactions in the Great Value Pharmacies general journal. Round to the nearest dollar. Explanations are not required.

2.	Prepare the liabilities section of the balance sheet for Great Value Pharmacies March​1, 2019 after all the journal entries are recorded.

Answer 1

ANSWER:-

1). Journal Entries of Great value Pharmacles

Date	Particulars	Debit	Credit
Mar.1,2018	Bank a/c	$525,000
	Loan from Bartow bank		525,000
	(Being amount borrowed from bartow bank)
Dec.1,2018	Cash a/c	$300,000
	Mortgage payable a/c		300,000
	(Being Wharehouse mortgaged for cash)
Dec.31,2018	Interest a/c	$11,000
	Interest payable a/c		11,000
	(Being interest for Saylor bank accrued for Dec-18 $300,000 * 44% * 1 / 12)=$ 11,000)
Dec.31,2018	Interest a/c	$52,500
	Interest payable a/c		52,500
	(Being interest for bartow bank accrued for the year ended $525,000 * 12% * 10 / 12= $52,500

2019

Date	Particulars	Debit	Credit
Jan.1,2019	Mortgage payable a/c	$3,000
	Interest payable a/c	$11,000
	Cash/Bank a/c		$14,000
	(Being monthly mortgage amount paid)
Feb.1,2019	Mortgage payable a/c	$3,000
	Interest a/c	$10,890
	Cash/Bank a/c		$13,890
	(Being monthly mortgage amount paid ) interest ( $300,000 - 3000 ) * 44% * 1/12=$10,890
Mar.1,2018	Mortgage payable a/c	$3,000
	Interest expense a/c	$10,780
	Cash /Bank a/c		13,780
	Being monthly payment made towards Mortgage ( interest = ($300,000 - 3,000 - 3,0000 ) * 44% * 1 / 12=10,780
Mar.1,2018	Loan from bartow bank a/c	$35,000
	Interest payable a/c	$52,500
	Interest expense a/c	10,500
	Cash/Bank		$98,000
	Being first installment of loan has been paid ( 525,000 * 2 / 12 * 12% ) = $10,500

2) Liabilities section of balance sheet on Mar 1,2019

Non current liabilities

Long term liabilities

1). Bank loan( $525 000 - 5,000 ) =$490,000

2).Mortgage payable ( $300,000 - ( 3,000*3 ) =$291,000

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